Sole Proprietorship

A sole proprietorship typically is a business operated by an individual. It is the simplest form of business structure, but this by itself does not mean it is best for a given situation. One person performs all of the functions required for the successful operation of the business.

The proprietor owns the business assets and is personally liable for any debts incurred by the business.

Any profits or losses from the business are combined with other income of the individual, and reported on the personal income tax return for the calendar year in which the fiscal year of the proprietorship ends.

Sole Proprietorship Advantages

• Costs of incorporation are saved until later (if ever).
• Easy to change your mind later since you are the only shareholder.
• Expenses can often be claimed against other personal income - very useful for home based businesses run by people who are also salaried employees.
• No need for annual reporting to government.

Sole Proprietorship Disadvantages

• You can personally be held responsible for all debts and other liabilities.
• Banks, suppliers and others are less willing to lend you money or extend credit.
• Some government programs are only available to registered corporations.
• You cannot claim employment insurance benefits if the business fails.